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AMZN HD WMT Risk-Free Rate 2.40% 2.40% 2.40% Market Risk Premium 8.00% 8.00% 8.00% Beta 1.45...

AMZN HD WMT
Risk-Free Rate 2.40% 2.40% 2.40%
Market Risk Premium 8.00% 8.00% 8.00%
Beta 1.45 1.15 0.40
Long-term Bond Yield 3.70% 3.85% 3.55%
Average Tax Rate 38% 37% 32%
MV Debt Capital $17,495 $27,141 $52,829
MV Equity Capital $355,438 $164,784 $214,341
WACC

compute the WACC for each of the three companies (Amazon, Walmart and Home Depot). You will need to compute the cost of debt capital and the cost of equity capital from the information provided. Determine the weighted average cost of capital from the capital structure data given.

Do the computation in the Excel file, show the formula. and then Interpret the results

Interpret the results in the WRITE SUBMISSION box. You are comparing and contrasting the results for the three companies.

Solutions

Expert Solution

The Cost of Debt of the three companies are similar with difference in basis points

the WACC of AMZN is highest among the three it is due to higher cost of equity of AMZN and higher proportion of equity in AMZN.

the WACC of WMT is Lowest among the three it is due to lowest cost of equity of HMT.

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jeff jeffy answered 1 year ago
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